Are There Gains from Pooling Real-Time Oil Price Forecasts?

30 Pages Posted: 25 Sep 2014

See all articles by Christiane Baumeister

Christiane Baumeister

University of Notre Dame; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Lutz Kilian

University of Michigan at Ann Arbor - Department of Economics; Centre for Economic Policy Research (CEPR)

Thomas K Lee

Energy Information Administration - US DOE

Date Written: July 2014

Abstract

The answer depends on the objective. The approach of combining five of the leading forecasting models with equal weights dominates the strategy of selecting one model and using it for all horizons up to two years. Even more accurate forecasts, however, are obtained when allowing the forecast combinations to vary across forecast horizons. While the latter approach is not always more accurate than selecting the single most accurate forecasting model by horizon, its accuracy can be shown to be much more stable over time. The MSPE of real-time pooled forecasts is between 3% and 29% lower than that of the no-change forecast and its directional accuracy as high as 73%. Our results are robust to alternative oil price measures and apply to monthly as well as quarterly forecasts. We illustrate how forecast pooling may be used to produce real-time forecasts of the real and the nominal price of oil in a format consistent with that employed by the U.S. Energy Information Administration in releasing its short-term oil price forecasts, and we compare these forecasts during key historical episodes.

Keywords: forecast combination, forecast pooling, oil price, real-time data, refiners' acquisition cost, WTI

JEL Classification: C53, Q43

Suggested Citation

Baumeister, Christiane and Kilian, Lutz and Lee, Thomas K., Are There Gains from Pooling Real-Time Oil Price Forecasts? (July 2014). CEPR Discussion Paper No. DP10075. Available at SSRN: https://ssrn.com/abstract=2501549

Christiane Baumeister (Contact Author)

University of Notre Dame ( email )

722 Flanner Hall
Notre Dame, IN 46556
United States
+1 574 631 8450 (Phone)

HOME PAGE: http://https://sites.google.com/site/cjsbaumeister/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Lutz Kilian

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States
734-764-2320 (Phone)
734-764-2769 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Thomas K. Lee

Energy Information Administration - US DOE ( email )

1000 Independence Avenue, SW
Washington, DC 20585
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
207
PlumX Metrics